Mobile Phones Breakthrough in Bihar

Bihar is India’s poorest state: 90 million people with per capita incomes akin to Ethiopia’s in a vast, overwhelmingly rural area.

Fixed-line telecom service is weak, and only 2 percent of the people have access to one of today’s most transformative forces, a mobile phone.

Bringing low-cost modern communications to Bihar at a large scale would be a development breakthrough. With the right pricing and distribution strategy, it could be a business win as well.

This has been IFC’s goal since 2008, when we financed Idea Cellular’s entry into Bihar. A rising local firm, Idea was committed to this challenging, wide-open market that as recently as 2006 it was receiving only $314 million in total annual private investment, by far the lowest of any Indian state.

The risk paid off. Today Idea has 2.4 million paying subscribers in Bihar.

Its profitable business model there includes per-second billing, inexpensive prepaid calling cards, and other customer-friendly products. With nearly 60 million subscribers nationwide, Idea has won Emerging Company of the Year honors from India’s top business newspaper, The Economic Times.

IFC advisory services are taking Idea deeper, targeting remote areas well beyond its usual distributors’ reach. Supported by Dutch donor funds, we have helped it find 1,200 villagers in Gujarat state who buy handsets bundled with Idea SIM cards for no more than $35, then sell airtime on commission to others who cannot afford to buy their own. This “win-win” model raises the village sellers’ incomes by 25 percent, increases rural telecom access, and builds our client’s market share.

Inspired by the IFC-financed Grameen Village Phone program in Bangladesh and its recent replications in Africa, this approach will now be rolled out on a much larger scale in Bihar and other states. It is one of the first projects in a larger IFC initiative for all of India’s low-income states, a region that together has almost as many poor people as all of Africa.